South Korean Shares Surge to 7-Week Peak After US Inflation Data

South Korean stocks surged to a seven-week high as the latest U.S. inflation data suggested a softer increase in consumer prices than anticipated, stoking expectations that the Federal Reserve may consider an interest rate cut by September.

The KOSPI index saw significant gains, with foreign investors turning into net buyers, while the Korean won appreciated against the dollar, hitting its strongest point in over a month. Concurrently, yields on South Korea’s benchmark bonds declined, indicating increased bond prices.

A Bullish Turn for KOSPI

Following the release of the U.S. consumer price data, the KOSPI rose by as much as 1.58%, reaching the highest level since late March. The gains moderated later in the trading session but still represented a substantial upward movement. This uplift was underpinned by improvements in heavyweight tech stocks. While Samsung Electronics saw a modest increase, SK Hynix's shares jumped notably. However, LG Energy Solution experienced a slight decline.

Foreign Investment and Currency Strength

In the foreign exchange markets, the won gained significant ground, with investors showing renewed confidence in the local currency. This was evidenced by foreign investors purchasing 201.3 billion won ($149.03 million) more in stocks than they sold. The won's value rose by 1.35% compared to its previous close, influenced by the anticipation of a favorable shift in U.S. monetary policy.

Market Movements in Bonds

The bond market saw a decrease in yields, which suggests an increased demand for South Korean debt securities. The yield on the most liquid three-year treasury bond fell sharply alongside the benchmark ten-year yield, both reaching lows not seen since the beginning of April.

Within the sector, corporate movements were also of note, with SK Innovation’s shares dipping amid talks of selling its subsidiary SK IE Technology, whereas SK IE Technology itself saw a minor uptick in its share price.

stocks, bonds, currency